FHA Loan To Value Restrictions For Cash Out Refinancing
Maximum Loan To Value Drops For FHA Loans
WE knew it was coming for sometime and it finally arrived. As expected, the FHA has lowered the cash out refinance Loan to value from 95% down to 85% as of April 1st.
This change is not permanent as of yet. The Department of Housing and Urban Development wants some time to take a look at all the loans it currently has in its portfolio. But we do not anticipate that it will go back up any time soon.
As we understand it, if you currently have a second mortgage which combined makes your loan to value ratio greater than 85% that would be allowed of your keep 2nd mortgage in tact.
In order to receive cash out from your property there must be 12 months seasoning, meaning that you must have owned the house for at least a year.
No longer will the FHA allow non occupied co-borrowers to help the borrower qualify for the mortgage.
If your loan amount is greater than $417,000 or if you live in an area where home values are declining, you must have two appraisals done.
Any borrower who is delinquent will not qualify for a cash out mortgage.
Although these changes are hard to swallow for some it may be the best course of action right now to preserve the FHA as strong alternative to a tight lending market.
FHA loans are one of the best resources for home loan financing right now and they are needed to revive our slumping housing market and our slumping economy.
